Research on the investment operation of Japan’s pension funds


(1.Faculty of Economics and Management, East China Normal University, Shanghai, China 200062)

【Abstract】Japan has the world’s largest public pension funds which are operated by the professional pension fund management institution GPIF in a relatively independent mode. Over the past decade, GPIF has performed successfully in pension fund operation, but its asset allocation and investment style remain to be improved. What is more, Japan also needs to increase the independence and operational efficiency of GPIF, improve investment portfolios and strategy, and perfect corporate governance mechanisms to achieve stable long-term returns on investment of public pension funds. China should learn from developed economies to ensure preservation and appreciation of basic pension funds. Specifically, it should introduce the mode of management by legal bodies, and cultivate the markets for pension fund managers. Meanwhile, more investment instruments must be introduced to expand the investment channels. The operators should take passive-investment-based strategy supplemented by active investment, and ensure appropriate allocation in basic pension fund portfolios.

【Keywords】 Japan; public pension fund; operation mechanism; asset allocation; investment strategy;


【Funds】 Project of National Social Science Fund of China (14BJY185)

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(Translated by LINmanzhen)


    [1]. ① Commonly known as “日本政府养老投资基金” in Chinese. [^Back]

    [2]. ② In 2006, Japan adjusted the benchmark index return rate of active investment in foreign bonds (public sector bonds and corporate bonds, not including national bonds) [^Back]

    [3]. ③ GPIF conducts alternative investments via beneficiary securities (internal investment). [^Back]

    [4]. ① About over 70% of the stock investments of pension funds in New Zealand, Sweden, France, Singapore and Canada go to the overseas markets. [^Back]

    [5]. ② The sizes of domestic share markets of various countries were figured out according to the data from Morgan Stanley Capital International (a famous American index compilation company). [^Back]

    [6]. ① According to relevant laws, OASDI is not only under unified management of the federal government, but also its balance of payments must be invested in securities assets whose principals and interest rates are guaranteed by the federal government, and the interest gained should also be deposited into trust funds, not allowed to be invested in stocks, real estate and so on. Thus, the US Social Security funds have a relatively low return rate of investment. [^Back]

    [7]. ② The proportion of CalERS’ stock investments in the U.S. domestic stock market was calculated with data of June 2015. [^Back]

    [8]. ③ It covers all the citizens of Canada over the age of 18. [^Back]

    [9]. ④ The fluctuations of various allocated assets are as follows: domestic bonds ±10%, domestic stocks ±9%, foreign bonds ±4%, foreign stocks ±8%. [^Back]

    [10]. ⑤ Ten trust banks and thirty investment advisory companies. [^Back]

    [11]. ① Another 3.65% was invested in fiscal bonds, with the total size of JPY 5012.2 billion. [^Back]

    [12]. ② The data labels in Figure 1 represent the ratios of passive investment to GPIF’s total investment in various years. [^Back]

    [13]. ③ The proportions of GPIF’s passive investment of pension funds in 2001 and 2002 were respectively 49.93% and 34.46%. [^Back]

    [14]. ① Internal investment refers to the financial investment made by public pension fund instructions according to their own judgments. Here it refers to the investment and operations of pension funds by GPIF, including direct trading of financial commodities or specific trusted investment. [^Back]

    [15]. ② The proportion of a listed company’s stocks held by a trustee financial institution in the total stocks issued by the company should be smaller than 5%. [^Back]

    [16]. ③ For an issuer, the investment proportion of domestic and foreign bonds issued by it in the total amount shall not exceed 5%. [^Back]

    [17]. ③ “Alternative investments” refer to investments without open trading platforms such as stocks, bonds and futures, including venture capital, PE, funds of funds, real estate, leverage buyout and mining industry. The disadvantage of alternative investments is a lack of liquidity. A project usually takes a couple of years to be monetized. Most of the alternative investment funds possess a lock-up period of five or ten years, and it is hard to redeem the funds halfway. [^Back]

    [18]. ④ The investment in unissued shares, infrastructure construction, real estate and other products in the alternative investment field defined clearly in the medium-term plan, the investment committee will deliberate, discuss and decide whether to invest or not. [^Back]

    [19]. ① According to the 2014 annual report, the internal investment proportion of ABP was calculated by the internal investments of its subsidiary company APG. [^Back]

    [20]. ② Such as professional investment managers and establishment of corresponding decision-making agencies. [^Back]

    [21]. ③ Passive investment according to stock indexes is allowed. In terms of the way of investment, specialized asset management institutions or trust banks are entrusted for investment. [^Back]

    [22]. ④ Specialized asset management institutions or trust banks can be entrusted to provide short-term lending, bill discounting and so on. [^Back]

    [23]. ⑤ Speculative investment in them is forbidden, but specialized asset management institutions or trust banks can be allowed to invest in equity derivatives aiming at hedging risks, such as stock index futures and stock index options. [^Back]

    [24]. ① For examples, OMERS, Canada’s largest pension fund, and DBJ of Japan. [^Back]

    [25]. ② GPIF’s active investment in domestic stocks accounts for only about 20%. [^Back]

    [26]. ③ Tokyo Stock Price Index: indicating the total market prices of stocks of all Japanese companies listed in the First Section of the Tokyo Stock Exchange. [^Back]

    [27]. ④ “JPX-Nikkei 400” consists of 400 stocks with relatively high investment attractiveness (such as high returns on equity or sound corporate governance of companies). The index is a new stock index jointly developed by the Japan Exchange Group and Nikkei Shimbun, and began to be used in the Tokyo Stock Exchange on January 6, 2014. [^Back]

    [28]. ① They are calculated according to Japan’s fiscal year (March 2015–March 2016). Because the data from January to March in 2016 had not yet been disclosed, the total returns on investment from April to December in 2015 were JPY –510.8 billion, which was the result of investment losses of JPY 7889.9 billion from July to September in 2015. [^Back]

    [29]. ② The investment return rates of Japan’s public pension funds from 2001 to 2014 were respectively –1.80%, –5.36%, 8.40%, 3.39%, 9.88%, 3.70%, –4.59%, –7.57%, 7.91%, –0.25%, 2.32%, 10.23%, 8.64% and 12.27%. [^Back]


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    2. Zhang, Y, 人口老龄化背景下的日本公共养老金制度. Shanghai: East China Normal University Press, 179–183 (2015).







    9. みずほ総合研究所. 年金のしくみ. 東京: 東洋経済新報社, (2007), pp. 111–134.


This Article


CN: 22-1065/F

Vol 36, No. 04, Pages 10-20

July 2017


Article Outline


  • Introduction
  • 1 Reform and characteristics of Japan’s investment and operation modes of public pension funds
  • 2 Operation, management and investment strategy of GPIF of Japan
  • 3 Existing problems in investment of Japan’s public pension funds
  • 4 Reform measures which should be taken by Japan with regard to public pension funds
  • 5 Implications
  • Footnote